Simplifying the Stock Market

The stock market is a simple concept by which many people buy shares of public companies. Since 1790 there has been a stock exchange of some form in the United States, and "the market" has been the financial benchmark of the nation?s economy.

There are numerous categories of stock to suit almost any need, goal or personality. They include:

Blue-chip stocks: These include several of the most prestigious well-established large companies. Many of these are household names such as Disney, IBM or Coca-Cola. These are typically older companies that the public has come to know and trust.

Growth stocks: As the name might suggest, these stocks have strong growth potential. These are typically companies that are newer, busily doing research and developing products and services in hopes of achieving growth. Much of the profits

Value stocks: These are stocks in companies that, for one of many reasons, are undervalued. They are stocks that are selling at a low price, but when analyzing the company?s sales, earnings and looking at other factors, give indications that they should be selling for a higher per share price.

Cyclical stocks: The earnings on these stocks are tied very closely to the overall business cycle and economic state. Examples include the housing industry and industrial equipment companies.

Defensive stocks: These remain stable in any economic conditions, such as food companies, drug manufacturers or utilities. These are stocks in companies that manufacture the necessities that people will need in any economy.